Sovereign Credit and the Fate of Leaders: Reassessing the "Democratic Advantage"

Citation metadata

Date: Sept. 2015
From: International Studies Quarterly(Vol. 59, Issue 3)
Publisher: Wiley Subscription Services, Inc.
Document Type: Report
Length: 248 words

Document controls

Main content

Abstract :

Byline: Matthew DiGiuseppe, Patrick E. Shea In this article, we contend that the "democratic advantage" literature (i) exaggerates the potential political backlash from credit downgrades in democracies; and (ii) overlooks the importance of sovereign credit to nondemocratic leaders. We argue that nondemocratic regimes receive a higher marginal political benefit from credit compared to democratic regimes. Consequently, changes in credit prices or credit access affect nondemocratic leaders' tenure more than democratic leaders' tenure. To test this argument, we provide the first statistical examination of the electoral punishment mechanism of the "democratic advantage." Our duration analysis shows that credit downgrades increase nondemocratic leaders' vulnerability more than that of their democratic peers. Our research reinforces the growing concerns about the conventional views about regime type, domestic constraints, and leaders' preferences toward sovereign credit and other political processes. CAPTION(S): Appendix S1. Figure S1. Percent change in the hazard of winning coalition failure resulting from a 1-unit downgrade in a country's S&P Rating in democracies and non-democracies above and below a starting credit rating of A-. Figure S2. Presents the 95% confidence intervals around the % change in hazard for each model present in Table S4 of the Appendix. Table S1. Bond Spreads, Regime Type and W Failure. Table S2. Cox Models: Negative Change in Creditworthiness, Regime Type and W Failure. Table S3. Cox Models: Career Creditworthiness Change, Regime Type and W Failure. Table S4. Selection Effects: Heckman Probit model of W Failure. Table S5. Potentially Confounding Variables. Table S6. Non-Democracy Country Years.

Source Citation

Source Citation   

Gale Document Number: GALE|A427486712